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Monday, December 14, 2009

US Begins TPP Negotiations, But Don't Get Too Excited

Finally, some good news on the US trade policy front: the Obama Administration announced today that it will begin formal negotiations to enter into a new free trade agreement (FTA):

United States Trade Representative Ron Kirk today notified Congress that President Obama intends to enter into negotiations of a regional, Asia-Pacific trade agreement, known as the Trans-Pacific Partnership (TPP) Agreement with the objective of shaping a high-standard, broad-based regional pact. In letters to Speaker of the House Nancy Pelosi (D-Calif.) and Senate President Pro Tempore Robert Byrd (D-W.Va.), Ambassador Kirk said that such an agreement would help to expand American exports, saving and creating good jobs here at home. The first round of negotiations has already been announced by the current Trans-Pacific Partnership members for March 2010.

"USTR will now intensify consultations with Congress and with American stakeholders to develop objectives for the Trans-Pacific Partnership agreement negotiations, in order to enter already-scheduled talks in March with a robust U.S. view that seeks the highest economic benefit for America's workers, farmers, ranchers, manufacturers, and service providers, and that reflects our shared values on labor, the environment, and other key issues," said Kirk. "The development of our negotiating positions will be a collaborative effort with elected leaders and stakeholders here at home, in order to shape an eventual Trans-Pacific Partnership Agreement that is a new kind of trade agreement for the 21st century, bringing home the jobs and economic opportunity we want all our trade deals to deliver."

The administration's TPP move signals not only the administration's first formal FTA negotiations, but also one of its first concrete free trade actions since President Obama took office almost a year(!) ago. In a year that has featured lots of pro-trade rhetoric but little matching action (and a lot of protectionism), this is undoubtedly a good sign for the future of US trade policy.

However, the TPP announcement should not be oversold: it's a nice development, but some cold-water perspective is in order.

First and foremost, the White House announcement is the first step in a very long and complicated process of FTA negotiations, and it comes as the administration still refuses to submit completed FTAs with Colombia, South Korea and Panama to Congress so that the stalled agreements can finally enter into force. In this light, it's clear that the Administration's TPP decision is pretty low-hanging fruit and doesn't show a new and strong political commitment to free trade policies in the face of domestic opposition. (Indeed, as of this posting, I can't find a peep of opposition to the TPP announcement from the anti-trade crowd.)

Second, and in a similar vein, the United States already has bilateral FTAs with two of the TPP's four current members - Chile and Singapore. So while a new TPP agreement could later be expanded to include other Pacific nations, for now it's really only a "new" US agreement with the other two TPP members, the relatively insignificant Brunei (no offense!) and New Zealand.

Third, the USTR statement calling for a "new kind of trade agreement" makes it unclear (i) whether this administration will pursue the same high level of liberalization that was standard in past FTAs; and (ii) whether they will bog down the negotiations with labor and environmental demands that threaten to eliminate most of the FTA's trade benefits. That we have an FTA with two TPP members is a good sign that the TPP agreement will achieve similar levels of liberalization, but obviously the devil will be in the details.

Finally, the White House has submitted its announcement without Trade Promotion Authority (TPA, formerly known as "fast-track" negotiating authority), which expired in 2007. Although USTR submitted the TPP announcement under the old TPA framework, it's unclear that this Congress will give TPA to President Obama without substantial changes to the old system - ones that could dramatically increase congressional input and thus alter the final appearance of any new FTAs. (Indeed, in an election year, it's far from certain that the President will even seek TPA from a Democrat-controlled Congress that's increasingly skeptical of free trade.) Furthermore, our trading partners have historically been reluctant to fully engage in FTA negotiations with a United States that lacks TPA. Thus, it's unclear just how serious the early rounds of TPP negotiations will be without TPA in force.

So to summarize: today's TPP announcement is good news, but it's a very small step for US free trade policy. And considering the delayed FTAs, the stalled Doha Round, and the numerous instances of US protectionism in 2009, we still have a long, long way to go.